An Executive Pay Witch Hunt

New York governor Andrew Cuomo has turned what should have been a simple, targeted criminal justice investigation into a destructive witch hunt of all New York charities. Such populist opportunism at the expense of the good name of the humanitarian sector has become epidemic. Elected officials consistently conflate smart investments in the talent, organizational strength, and long-term planning necessary to address massive social problems with fraud. Why? Because they lack a fundamental understanding of how long-term social problems get solved and because the humanitarian sector has been too terrified to stand up to them.

Within three weeks the task force sent letters to hundreds of nonprofit organizations demanding to know what they pay their executives and board members. (Apparently, neither the governor nor anyone on his task force or in his office knew that this information is readily available on the organizations’ tax forms.) It gave them 20 days to respond. Implying that most humanitarian-sector leaders are liars, the letters ask board members, not the executives themselves, to reply because “executives are likely to have ‘a significant interest in the size of their compensation.'” The letters also warned that “the regulatory agencies involved hold powerful leverage through their ability to cut off financing to groups that fail to comply.”

Cut to present. On February 6th, the State’s Standing Committee on Investigations and Government Operations is holding a hearing. Stated purpose: “To examine executive compensation at not-for-profit organizations receiving State funding and the actions needed to prevent State tax dollars from being wasted on excessive salaries…” The committee points to a finding of the Division of the Budget that at not-for-profit organizations under contract with state mental hygiene agencies, there were 1,926 employees with salaries greater than $100,000 in 2010. “It is unconscionable that funds that could be providing badly needed services are spent instead on bloated management salaries.”

Wow, the hearing hasn’t even been held yet, and it’s clear that salaries are bloated. Why even hold the hearing? The dollar amount itself seems to be what’s causing the outrage — the question of whether those served by these organizations were better off as a result of the investment in executive leadership seems unlikely to be raised. And what a double standard. The Empire Center for New York State Policy shows 116,819 (that’s one hundred sixteen thousand eight hundred and nineteen) people on state, city, county, and public authority payrolls in 2010 in New York who make at least $100,000. These include the head basketball coach at SUNY Binghamton ($1,026,793), a professor at SUNY Albany for 10 months ($793,200), at least a dozen “Senior Stationary Engineers” (whatever that is) at the Department of Environmental Protection (each earning more than half a million dollars), and the athletics director at SUNY Buffalo ($355,040). I could list thousands more.

Yet it’s the leaders at charities who are being singled out.

Before the hearings have even been held, Governor Cuomo has reached a conclusion. His 2012-2013 budget requires organizations providing services to the state to ensure that “at least 85 percent of every public dollar will be spent on direct services, not administration.” That’s up from the state’s historic requirement of 75%, which was onerous to begin with. In addition, “reimbursement for any executive’s compensation will be capped at $199,000.”

This notion of suppressing overhead to give taxpayers more bang for their buck is the opposite of how it works. Suppressing overhead suffocates organizations and leads to higher turnover, poorer leadership, and worse service. All of this is documented in research, widely discussed by thought leaders, and even now taught in college nonprofit management classes — which shows you just how ginormous the gap is between leading-edge thinking and public policy. And the notion that we should set salary ranges for state-funded basketball coaches five times higher than what we set for leaders committed to ending homelessness really says everything about public policy makers’ illiteracy or obliviousness on what it takes to solve social ills.

If Governor Cuomo wishes to suffocate his nonprofit service providers and ensure the persistence of the state’s social problems, he’s just found the perfect way to do it. But I don’t believe that’s what he wants. I believe he doesn’t know what he’s doing. In large part, public policy makers don’t know what they’re doing because the humanitarian sector has cowered before them instead of educated them.

This is a teachable moment on two fronts. It’s a chance to educate Governor Cuomo and a chance for the humanitarian sector to experience the liberation that comes with standing up for itself. It must be seized.

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